Mansion Impossible

This real estate-based game is a fun way to waste some time. Found it on Eric's blog.

Even Arizona Feels Effects Of Katrina And Wilma

Out here in the desert, we remain in the midst of a multi-year drought, yet we still are feeling the effects of the hurricanes hitting the eastern half of the U.S. Gas prices, of course, are the most visible repercussion, but the effects are also turning up in unexpected places. I received a letter yesterday from my carpet supplier informing me of shortages of the raw materials needed to manufacture carpet. Here are some statistics they cite for the chemicals needed to make carpet and pad:

• 34% of North American capacity of propylene is shut down
• 68% of North American capacity of butadiene is shut down
• 53% of North American capacity of paraxylene is shut down
• 40% of North American capacity of benzene is shut down
• 59% of North American capacity of cyclohexane is shut down

Their source for these stats is CMAI Hurricane Update.

The upshot of all this is that they are increasing their prices by $1 per yard, effective November 1. Take this into account when figuring your next rehab job.

A Bit Of A Breather

I'm sort of in a take-a-break mode now. I've got to take care of filing all the paperwork from the property sale and send off the settlement statement to my CPA to have the data entered into Quickbooks. (That's beyond my accounting skills now, but once I see how she does it, I should be able to do it myself in the future.) I also just got a new computer (courtesy of the profits from this flip), so I've been spending time transferring data from my old system to the new one. My home office is a mess and I am shopping for new office furniture.

If a good deal comes my way, I won't turn it down, but I'm not going to be actively searching for properties until I clear up a couple of my backlogs. Which reminds me, one of the things I need to do is send some follow-up emails to the folks who responded to my entry about needing birddogs. I need to see if they are still birddogging and let them know I have funds available again.

Final Results And Post Mortem For House 11

OK, I haven't been able to get the detail I want out of my analysis, mainly because I'm having trouble entering all the stuff into Quickbooks, so I'll need to get with my CPA on that. (I could do it by hand, but my time is pretty limited right now.)

Anyhow, here are the numbers on this property:

Purchase Amount	- $128,00.00
Fix Up Costs	- $15,254.87
Costs Subtotal	- $143,254.87
Selling Price	$181,000.00
Late Close Of Escrow Fees Collected	$800.00
Selling Costs	-$8,155.50
Property Taxes	- $872.59
Income Subtotal	$172,771.91
Misc. LLC Expenses	- $500.00
Profit	$29,017.04
Time Property Held	214 days
Total Return (ROI)	20.3%
Annualized ROI	34.6%

Fix Up Costs include the repairs I made plus utility payments during the time I held the property. Misc. LLC Expenses include the costs of running the business - a fax line, office supplies, etc. While not technically related to this property, this is the only property I've sold this year, so the profits of the entire LLC are really the same as the profits made by this one property.

All in all, that's not bad. If you look back to the rough estimates I made when I bought the place (check the Comments section), it seems I was wildly optimistic :-) I guessed $2,500 for fix up costs and I went way over that. Part of that was a $2,000 loss to the first cabinet guy. I also didn't originally intend on replacing the cabinets, which was about another $5,000. Additionally, I didn't know the house had aluminum wiring that would need to be fixed to the tune of about $1,000. But even excluding those unseen $8,000 costs, I still was over my fix up estimate by about $4,500.

Of course, I was also off on my estimate of the time it would take to get the property back on the market. I figured 2 months and it was closer to seven! But again, 2 months of that was my own fault for letting the ordeal with the first cabinet guy drag on and on. (FYI, if I had not used the first cabinet guy, I would have saved $2,000 and 2 months, which would have brought my profit to $31,017.04 and the holding time would have been reduced to 154 days, giving an ROI of 21.7% and an annualized ROI of 51.4%. And if I hadn't had to raise my buying price by $8,000, I could have had even better numbers... Woulda coulda shoulda....) It's almost embarrassing to look at entries titled "House 11 Should Be Listed By This Weekend!" that were posted 6 months ago. I was so naive :-)

The good news is I was also wrong on my estimate of the selling price. I estimated it would sell for $149,900 and we ended up selling for much more than that. Part of this error was due to me basing my estimate on past sales in the area rather than current listings, and part was due to the increased holding time - property values were rising dramatically as the cabinet ordeal dragged on and I profited from that.

So my investors are happy, I learned a lot, and we all made some money on this deal. Now it's on to the next one!

Phoenix Area May Be Peaking

Just spoke with my real estate agent this morning (who is still having a hard time believing we finally closed!) about the general housing outlook in Phoenix. There are currently over 18,000 active listings in the MLS. A few weeks ago, there were 15,000. Time on market is also increasing. In other words, the seller's market is disappearing here, so be careful when buying properties in this area. Also, beware of comps - any high comps you find might be from the peak of the market.

I should also mention that her husband is a principle at www.buyazforeclosures.com, a company that buys and resells foreclosures. His business is picking up after being down for about 8 months, so more foreclosures are happening.

Opportunities are starting to present themselves to those who can see them. Remember: you make your money when you buy, not when you sell!

In other news, I called my bank to check on the status of the wire transfer and was told their computers were down. They will call me back when they are up.

ESCROW HAS CLOSED!!!!

Escrow has closed!!! We're just waiting for confirmation from the recording office that the documents have been recorded and then the funds will be released! That should happen before 5 PM today!!

YAAAAAYYYYY!!!! I'll have final figures tomorrow and will then post the details of the investment - ROI, etc.

Should Close Today

Of course, I've said that before.

I just got off the phone with the escrow officer and she said the lender had just one last requirement - they wanted a letter of explanation from the buyer about one of his renters or something. I didn't get many details because I don't want to get involved with that, but I was told that the loan officer wrote the letter and is getting the buyer to sign it. He shouldn't have to overnight it to them or anything, so hopefully we will close today. And no, we have no idea why it has taken the lender over 1.5 months to request this letter.

I found out it is the buyer who is paying the $50 a day fee. And yesterday was a bank holiday, so the funds couldn't have been wired to me anyway.

For those of you looking for a lender or dealing with a buyer's lender, the company that is giving my buyer such a hard time is Argent Mortgage. I recommend avoiding them like the plague.

This Lender Is Unbelievable!

We were supposed to close Thursday or Friday, but the escrow agent got a call Friday from the lender. Apparently, on one of the loan doc pages, the notary didn't put his stamp in precisely the right place, so the lender wanted that page redone. He also decided he needed a document for the Patriot Act, which is basically a copy of the buyer's driver's license. So a mobile notary was sent to the buyer on Friday and the requested documents were FedEx'd to the lender for morning delivery today. We'll see what they say now. I'm glad I got the $50 per day fee added on. And as soon as I find out this lender's name, I'll let you know so you can have a heads up if you run into them.

I've Been Interviewed!

A short interview with me has been posted at www.reiblog.org. My interview is here.

We Have Docs!

Yesterday, the escrow officer received docs from the lender! If all goes well (and based on how things have been going, that is a mighty big if), the loan should fund on Thursday or Friday.

One good thing is that we were able to get the buyer to agree to a $50 a day fee for each day they are past the scheduled close of escrow. I stole this idea from a comment Empty Spaces made on Hespy's Real Estate blog. The fee is retroactive to the day the Cure Notice period ended, so as of yesterday, it was at $650.

What A Weekend

It was a fairly hectic weekend, in terms of the property. On Friday afternoon, I heard from my agent that escrow still had not closed because the buyer's lender STILL had not provided docs for the buyer to sign. No one at the lender will return the calls of the buyer or the escrow agent. The buyer's real estate agent (who is also his daughter) has gone out of town for two weeks. We tried calling her and got a message telling us to contact her assistant. Her assistant had no idea she was out of town.

I didn't want to miss out on any weekend traffic if I had to put the house back on the market, so my agent and the escrow agent discussed our options. The only reason anyone can think of now for the lender's behavior is that, for some reason, they want to have this loan funded in October instead of September and they were delaying us until Monday. Technically, we are no longer under contract with the current buyer, since we've already delivered the Cure Notice, so we've put the house back on the market. However, the escrow officer is leaving the escrow open in her system until Monday (today), in case loan docs suddenly appear. If they do, the house goes to the buyer. If they don't, I'll get his deposit and we'll move on to another buyer.

The house went back on the market at around 11:30 AM Friday and I ran back out there to put the lockbox back on. Within 4 hours, we had an offer come in. By Sunday, we had 5 offers. Unfortunately, none of them are very strong. Most are for full price or more, but they usually want me to credit back 1%- 3% of the price for closing costs. Most are also being bought with 100% financing and only have a $500 earnest money deposit. Not too promising. We asked a couple of them if they would increase the deposit to $1,000 and make it non-refundable after the inspection period. They all rejected that. (One buyer already lost a deposit because they couldn't get financing before escrow closed. This person has been looking for a house for 6 months. He obviously doesn't have good credit.)

On Sunday, we did get one offer that looks promising. It's for full price, but they want me to contribute 1% cash back. They don't want a home warranty, they are putting down $1,000 earnest money, and they will pay for the inspection. The agent said the 1% cash back wasn't really required and they would probably drop it, if we asked. The agent also doesn't think making the deposit non-refundable will be a big deal. So towards the end of the day today, (so the first buyer's lender has a chance to submit docs), we will counter that offer and see how it goes.

I feel bad for the first buyer. He really likes the house and wants it, but his lender is really screwing him. If I was him, I'd be threatening a lawsuit, or at the very least, a complaint with the state's banking commission. This lender is not returning phone calls and that directly caused him to lose $2,000 (or it will, if they don't come through today.)

The only reason I am still giving the first buyer a chance is that I won't have to wait another month for a new escrow. This buyer already has the keys and has already done his inspection. I have also already taken the utilities out of my name. If I have to have another escrow, we're talking another month, minimum, and I'll have to get the utilities turned back on, which will probably entail some costs. The $2,000 I'd make would more than cover it, but I want to move on to the next project now.